The CMS Innovation Center announced a new, optional incentive for organizations in certain models, called the Substance Access Beneficiary Engagement Incentive (BEI). Starting April 1, hemp-derived products can be incorporated into patient care plans in the ACO REACH and Enhancing Oncology models with an expansion into the Long-Term Enhanced ACO Design (LEAD) model next year. Products must be approved by patients’ clinicians and consistent with model requirements and applicable laws. Organizations that choose to participate must receive CMS approval to provide up to $500 of hemp-derived products per year per eligible beneficiary. The incentive will not pay for or reimburse providers for hemp-derived products under the BEI incentive, and the agency states that the optional coverage does not conflict with the Controlled Substances Act. This new incentive option follows previous efforts by the Trump administration to expand access to new and innovative healthcare supports (CMS Newsroom, April 1; Fierce Healthcare, April 6).
The AHIP and Blue Cross Blue Shield Associations announced that major health plans have eliminated 11% of prior authorization requirements across several services, including imaging, radiology, cardiology, otolaryngology, and other “high-value” services. This follows the voluntary commitments made in June 2025 by major healthcare payers to the Trump administration that they would streamline prior authorization processes. The associations plan to complete additional goals, like standardizing the prior authorization submission process and improving response time, by January 1, 2027 (Politico Pro, April 7).
On March 30, a coalition of 131 hospitals in 16 states jointly filed a complaint against the HHS over CMS’ 2023 final rule that caused reductions in Medicare disproportionate share hospitals (DSH) payments. The plaintiffs argue that the agency has overstepped its authority, as the rule changed the way in which it calculates payments to hospitals treating a large number of low-income patients. The hospitals request that the rule be overturned, with DSH payments returning to its original methodology and plaintiff hospitals being paid additional reimbursements with interest. In a previous lawsuit last year, the Supreme Court ruled in favor of HHS, ruling that a patient’s SSI could not be counted in DSH payments if they had not received payment the month they were hospitalized. The HHS has not yet made any public comment on this recent suit. (Becker’s Hospital Review, March 31; Healthcare Dive, April 1).
CMS is prioritizing Medicaid program integrity in its budget justification for FY2027. The agency requests $154.6M, a $10.7M increase from the previous fiscal year, to make workflows more efficient, increase transparency, and consolidate systems. The funding will be used to expedite the transition to MACF in systems, increase investments in the MACPro system for state plan amendment (SPA) approvals, increase use and quality of T-MSIS data, and refresh the PMDA system used for 11115 waivers. Additionally, it requests $25M to modernize Medicaid data systems on a federal and state basis to help manage fraud, waste, and abuse. (Inside Health Policy, April 3).
The Trump administration’s FY2027 budget proposes a major restructuring of HHS through the creation of the Administration for a Healthy America (AHA), which would combine the Health Resources and Services Administration, Substance Abuse and Mental Health Services Administration, and select functions of the Centers for Disease Control and Prevention. The administration requested a similar restructuring plan in its last budget proposal, but Congress did not act on it.
Alongside this structural shift, the proposal includes $111.1B in discretionary funding, representing a 12.5% decrease from FY2026, and includes multiple program reductions. These cuts include a $5B reduction to NIH, as well as additional decreases of $129M for AHRQ, $356M for ASPR, $768M for refugee resettlement, $819M for the Unaccompanied Alien Children program, $775M for the Community Services Block Grant, and $4B for the Low-Income Home Energy Assistance Program. The administration estimates about $5B in savings from consolidating or eliminating programs and is advancing a restructuring that was not enacted in FY2026, alongside workforce reductions of about 18,000 staff across HHS.
The proposal also introduces several policy changes, including ending remaining obligations under the Hill-Burton Act, which still applies to about 127 facilities, consolidating behavioral health grants into a single block grant, establishing an accreditation process for Certified Community Behavioral Health Clinics, revising Nurse Corps loan repayment to a fixed award structure, expanding Public Health Service Commissioned Corps authority, and updating Organ Procurement and Transplantation Network fee authority. Finally, the proposal expands telehealth policy functions and prioritizes investments in nutrition, food safety, and artificial intelligence, while also reducing or eliminating funding for certain public health programs, including teen pregnancy prevention, raising concerns about potential impacts on access to services, public health capacity, and research (Inside Health Policy, April 6; Fierce Healthcare, April 3; Inside Health Policy, April 3).
On March 27, the Government Accountability Office (GAO) released a report titled “CMS Innovation Center: Obligations and Model Testing Progress” to update earlier work from 2012 and 2018. The GAO reviewed the Innovation Center’s funding and test models from 2011 through 2024, described the outcomes of the models tested, and assessed how the Innovation Center follows performance management and assessment practices. Research showed that the Innovation Center dedicated $11.4B from 2011 through 2024, funding 70 models during that time. Of the 70 models tested, 24 models were operational as of January 2025. Four of the 70 models tested showed net savings and were expanded: Pioneer Accountable Care Organization Model; Medicare Diabetes Prevention Program; Repetitive Scheduled Emergent Ambulance Transport Model; Home Health Value-Based Purchasing Model. In May 2025, the CMS Innovation Center established new long-term and near-term goals that the agency will use to guide the development and implementation of new and existing models (GAO, March 27).
Three months after a Medicaid contractor in Idaho cut mobile treatment program for individuals with severe mental illnesses, four patients have reportedly died. The state’s Assertive Community Treatment (ACT) program currently serves about 200 people. The cuts followed the state’s decision to cut funding for its ACT program and peer support services. The cuts were made in compliance with Governor Brad Little’s ask to mitigate the state’s budget shortfall. On April 2, Governor Little signed a bill into law to restore funding to Medicaid mental health programs (Idaho Capital Sun, April 3).
Maine lawmakers advanced a budget proposal to support reproductive health providers following federal funding disruptions. The plan includes $5M annually for services such as contraception, infertility care, cancer screenings, prenatal and obstetric care, and STI prevention and treatment, and would require the state to offset future federal funding disruptions to Medicaid and Title X. Providers, including Planned Parenthood of Northern New England and Maine Family Planning, lost Medicaid reimbursements due to a provision in H.R.1, reducing funding by 25% to 50% and leading to three clinic closures, and also experienced freezes and lapses in Title X funding. The state previously provided $6M to address funding gaps, and Gov. Janet Mills proposed an additional $2.25M. If enacted, Maine would be among the first states to establish a comprehensive state-level safety net to offset volatility in federal funding for reproductive health services, including the first Title X-specific safeguard and the second Medicaid-related protection after Oregon (Maine Morning Star, April 2).
Indiana is proposing changes to limit hospital use of the federal 340B Drug Pricing Program for Medicaid patients. The proposal, introduced by Secretary Mitch Roob, would eliminate Medicaid reimbursements tied to 340B and instead shift to the Medicaid Drug Rebate Program, with an estimated $60M in annual state savings and a July 1 implementation date. State officials argue the change would ensure savings remain within Medicaid, while hospitals, particularly rural providers, warn the loss of 340B revenue could reduce funding for services such as cancer care and obstetrics and further strain facilities operating on thin margins (Indiana Capital Chronicle, April 6).
A state appeals court has overturned a major Medicaid managed care procurement tied to more than $7B in annual long-term care spending, requiring the process to restart. The Commonwealth Court of Pennsylvania found that the bid evaluation for the state’s Community HealthChoices program lacked consistency, highlighting that all applicants received identical scores across five regions despite clear differences in population and service needs. The court determined that the scoring methodology did not align with procurement requirements. The case was brought by Highmark Wholecare, and UnitedHealthcare of Pennsylvania, which were not selected to advance. The procurement process must now restart, delaying new contract awards. Current plans, including AmeriHealth Caritas, PA Health & Wellness, and UPMC for You, will remain in place for now (MSN, April 7).
